Estonia to finance 1,000 MW offshore wind farm at Hiiumaa

Power News - Published on Wed, 01 Mar 2017

Dependence on Russian fossil energy is one weapon Putin has used to subvert democratic rule in neighboring nations. Like most of the world’s petro-states, Russia is an autocracy. But one nation having none of that is Estonia.

1000 MW offshore wind farm planned off Hiiumaa Estonia
“Gas dependence on Russia has negative consequences across the region. One is corruption, as the Kremlin and its proxies buy the political support of foreign leaders in order to maintain Russia’s predominant market position in their countries. In Ukraine, for example, a group of pro-Russian oligarchs grew rich off of gas deals as they subverted the effectiveness of Ukraine’s democracy.”

This dependence has the effect of subverting young democracies that depend on Russian gas.

“Just the need for low, or at least affordable, energy prices encourages some central and Eastern European countries to follow the Kremlin’s line on foreign policy. In private, for example, Hungarian officials admit that a major factor behind the country’s pro-Russian statements and public declarations against sanctions on Russia is related to energy. Hungary hopes that its pro-Russian stance will win it lower gas prices, but the cost is to degrade the European Union’s cohesion.”

Hungary was for 20 years a democracy. Now Hungary has reverted to autocracy under strongman Viktor Orban.

Kicking the Gas Habit
But one of Russia’s border nations in the Baltic, Estonia, has taken a bold approach. Estonia had been importing all of its natural gas for heating and hot water from Russia, but that ended last year.

In mid-2016, together with Lithuania, Estonia put a stop to its gas imports from Russia. Now Norway’s Statoil will instead provide gas for heat and hot water in the country.

Despite the challenges due to its position between European democracies and Putin’s autocracy in Russia, Estonia is looking to increase its clean energy capacity. It has already overshot its clean energy generation targets for 2020.
Estonia Has Permitted a 700–1,000 MW Offshore Wind Farm in the Baltic Sea

Starting almost a decade ago, Estonian developer 4Energia has been going through the environmental and technical permitting of what was proposed as a 700 MW to 1,000 MW wind farm northwest of the island of Hiiumaa in the Baltic Sea.

(4Energia is also known as Nelja Energia: Nelia means four, referring to four clean energy sources the firm plans to specialize in: wind, water, biomass and solar.)

“The main challenge for the development of wind energy generation facilities in the Baltic States are vested interests among companies importing electricity from Russia. Powerful lobbyists are able to slow down the process significantly, even impeding the relevant law-making.”

It has taken 4Energia years to develop the Hiiumaa Offshore Wind Farm. Finally, with all that paperwork now in hand, the last hurdle is financing.

4Energia has proposed to utilize the EU’s cooperation mechanism to help finance the Hiiumaa Offshore Wind Farm, its largest Baltics project.

As a very small nation of just 1.3 million, it is not easy for Estonia to justify such a massive offshore wind farm that further overshoots its own country climate targets under the EU Directive. Estonia has already met its EU target of 25% renewable energy by 2020, and it exports surplus renewable energy to its neighbors.

One approach being taken to finding funding, is presenting the project as a way for another country that is not meeting its target to finance it under the EU Cooperation Mechanism, whereby:

“Joint projects: Two or more EU countries can co-fund a renewable energy project in electricity or heating and cooling, and share the resulting renewable energy for the purpose of meeting their targets. These projects can but do not have to involve the physical transfer of energy from one country to another.”

A partnership like this could be a win-win. An EU member state that is not able to meet its targets could be the financing partner. Financing a project elsewhere would qualify such a partner as having met its own 2020 target. Such an arrangement could also be beneficial in getting wind turbine orders from the array if financed by a nation with an industrial wind sector.

But the peculiar combination of factors that would be needed, of being at risk of not meeting its own target AND yet having its own growing industrial wind sector is an unusual combination.

The UK, or even better, France, might be a good potential financing partner. Both France and the UK are at risk of missing their targets but while the UK imports most of its turbines from Germany, France is expanding its domestic wind manufacturing.

It is unrealistic to expect a small nation of 1.3 million like Estonia to set up its own domestic supply chain for building this offshore wind farm, even such a large one. Instead, the turbines, towers, nacelles and cables will be imported, with Germany’s Enercon and Finland’s WinWind acting as the main suppliers.

While 4Energia is the largest wind developer in the Baltics, to date its projects have been only on land.

Offshore wind development is generally more challenging than onshore, but the Baltic Sea does offer a relatively easy transition geologically, with a shallow and sandy seabed. Costs are lower in the sheltered Baltic Sea than in the more exposed North Sea, because lower wave heights reduce the costs of construction and ongoing maintenance. 4Energia will use ice-proof gravity-based foundations.

In turn, this ease of access for performing maintenance results in more productive hours of operation — which further lowers costs again. 4Energia projects that the Hiiumaa Offshore Wind farm would have a very high capacity factor of approximately 50%, and prompt and easy maintenance would be needed to achieve that.

Even More Offshore Wind Projects in Pipeline for Estonia
In addition to 4Energia’s project, an equally ambitious Estonian offshore wind project has just begun the multi-year permitting process, this one in the Baltic Sea’s Riga Gulf.

Eesti Energija is the country‘s state-owned primary power generator, distributor, and supplier. Its renewable arm just submitted its application to build another gigantic offshore wind farm south of Kihnu Island in the Bay of Riga. This too is proposed at a 700–1,000-MW capacity. (Applicants seem to be given leeway in finalizing capacity in Estonia.)

In addition to these two huge offshore wind farms, another smaller project has made its application to begin its own environmental permitting. Neugrund, a startup firm, proposes to develop the Neugrund Offshore Wind Farm on Estonia’s North coast up by the Gulf of Finland. The planned capacity is between 100 MW and 234 MW.

Energy Independence Enables Political Independence
Estonia is expanding its clean energy to the point of being a clean energy exporter, and has shifted its gas buys to state-owned Statoil, in the world’s only oil-rich liberal democracy, Norway.

“The independent state of Estonia can only exist permanently in a space of democratic values,” said Estonian president, Kersti Kaljulaid at this week’s Estonian Independence Day. “A small state cannot function in a geopolitically tense place such as ours if it is internally undemocratic.”